Securing a home loan is a significant step towards owning your dream home. Many first-time homebuyers and those with limited savings often look for loans that cover a substantial portion of the property value. A 90% home loan, where the borrower only needs to provide a 10% down payment, can be incredibly appealing. But which banks actually offer these high-loan-to-value (LTV) mortgages? Let's dive into the specifics, exploring which financial institutions provide 90% home loans, the eligibility criteria, benefits, and potential drawbacks.

Understanding 90% Home Loans

Before we delve into specific banks, let's clarify what a 90% home loan entails. Simply put, it's a mortgage that covers 90% of the property's purchase price, leaving the borrower to finance the remaining 10% plus any associated costs like stamp duty, legal fees, and other charges. These loans are particularly attractive for individuals who:

• Have limited savings for a large down payment.
• Are first-time homebuyers eager to enter the property market.
• Want to preserve their capital for other investments or expenses.

However, it's essential to understand that 90% home loans typically come with higher interest rates compared to loans with lower LTV ratios (e.g., 80% or 70%). This is because lenders perceive them as riskier. Additionally, you might be required to pay Lender's Mortgage Insurance (LMI) to protect the lender in case you default on the loan. Despite these factors, a 90% home loan can still be a viable option for many, making the dream of homeownership achievable sooner rather than later.

Banks Offering 90% Home Loans

Okay, guys, let’s get to the heart of the matter: which banks actually offer 90% home loans? While the availability of these loans can fluctuate based on market conditions and lender policies, several financial institutions commonly provide them. Keep in mind that it's always best to check directly with the bank or a mortgage broker for the most up-to-date information. Here are some banks and lenders that often feature 90% home loan products:

Major Banks

• Commonwealth Bank (CBA): As one of Australia's largest banks, CBA often has options for 90% home loans, particularly for first-time homebuyers. They offer various loan products with competitive interest rates and flexible repayment options. However, be prepared for stringent eligibility criteria.
• Westpac: Another major player in the Australian banking sector, Westpac, also provides 90% home loans. They may offer special deals for certain professions or first-time buyers. Keep an eye on their promotions and compare them with other lenders.
• National Australia Bank (NAB): NAB is known for its customer-focused approach and often has 90% home loan products available. They might offer additional benefits such as offset accounts or redraw facilities, which can help you manage your mortgage more effectively.
• ANZ: Rounding out the Big Four, ANZ also participates in the 90% home loan market. They provide a range of home loan options, and it's worth exploring their offerings to see if they align with your financial situation.

Other Lenders

• Non-Bank Lenders: Beyond the major banks, several non-bank lenders specialize in 90% home loans. These lenders often have more flexible lending criteria and may be more willing to approve loans for borrowers who don't fit the traditional banking mold. Examples include lenders like Pepper Money, Resimac, and Liberty Financial.
• Credit Unions: Credit unions can also be a good option for 90% home loans. They often have a more community-focused approach and may offer more personalized service and competitive rates. Check out local credit unions in your area to see what they offer.

Factors to Consider

When comparing banks and lenders, consider these crucial factors:

• Interest Rates: Compare the interest rates offered by different lenders. Even a small difference in the interest rate can significantly impact the total cost of the loan over time.
• Fees and Charges: Be aware of all the fees and charges associated with the loan, including application fees, monthly fees, and early repayment fees.
• Lender's Mortgage Insurance (LMI): Understand the cost of LMI and how it's calculated. LMI protects the lender, but it's an expense you'll need to factor into your budget.
• Loan Features: Look for loan features that can benefit you, such as offset accounts, redraw facilities, and flexible repayment options.
• Eligibility Criteria: Ensure you meet the lender's eligibility criteria, including income requirements, credit score, and employment history.

Eligibility Criteria for a 90% Home Loan

Getting approved for a 90% home loan isn't a walk in the park. Lenders need to be confident that you can repay the loan, so they have specific eligibility criteria you'll need to meet. Here’s a rundown of what lenders typically look for:

Income and Employment

• Stable Income: Lenders want to see a stable and consistent income. This usually means being in your current job for at least six months, if not longer. If you're self-employed, you'll likely need to provide at least two years of financial statements.
• Income Verification: Be prepared to provide payslips, bank statements, and tax returns to verify your income. Lenders need to ensure you have enough income to comfortably cover your mortgage repayments and other expenses.

Credit History

• Good Credit Score: A good credit score is crucial. Lenders use your credit score to assess your creditworthiness. A higher score indicates a lower risk of default.
• Clean Credit Report: Your credit report should be free of any defaults, late payments, or bankruptcies. Any blemishes on your credit report can make it harder to get approved for a 90% home loan.

Deposit and Savings

• Genuine Savings: Lenders prefer to see that you've saved the 10% deposit yourself, rather than relying on a gift or borrowed funds. This demonstrates your ability to manage your finances and save consistently.
• Savings History: A good savings history can strengthen your application. Lenders want to see that you have a track record of saving money regularly.

Assets and Liabilities

• Assets: Lenders will assess your assets, such as savings, investments, and other properties. Having assets can improve your chances of approval.
• Liabilities: Lenders will also look at your liabilities, such as credit card debt, personal loans, and car loans. High levels of debt can negatively impact your borrowing capacity.

Loan-to-Value Ratio (LTV)

• 90% LTV: As the name suggests, the loan will cover 90% of the property's value. The remaining 10% must come from your deposit.

Lender's Mortgage Insurance (LMI)

• LMI Requirement: Because 90% home loans are considered higher risk, you'll likely need to pay LMI. This protects the lender if you default on the loan. The cost of LMI can vary depending on the lender and the size of the loan.

Benefits of a 90% Home Loan

Despite the higher interest rates and LMI costs, 90% home loans offer several advantages:

Faster Homeownership

• Get into the Market Sooner: The most significant benefit is that you can enter the property market sooner. With only a 10% deposit required, you don't have to spend years saving up a larger down payment.

Capital Preservation

• Retain Capital for Other Investments: A 90% home loan allows you to retain your capital for other investments or expenses. You can use the money you save on the deposit to invest in stocks, bonds, or other assets.

Potential for Property Value Growth

• Benefit from Property Appreciation: By getting into the market sooner, you can benefit from potential property value growth. If property prices rise, your equity in the property will increase.

Tax Benefits

• Potential Tax Deductions: In some countries, you may be able to claim tax deductions on the interest you pay on your mortgage. This can help reduce the overall cost of the loan.

Drawbacks of a 90% Home Loan

Of course, 90% home loans also have some drawbacks that you should be aware of:

Higher Interest Rates

• Increased Borrowing Costs: 90% home loans typically come with higher interest rates compared to loans with lower LTV ratios. This means you'll pay more interest over the life of the loan.

Lender's Mortgage Insurance (LMI)

• Additional Expense: LMI can be a significant expense. It's a one-time fee that protects the lender, but it doesn't benefit you directly.

Stricter Eligibility Criteria

• Challenging Approval Process: Lenders have stricter eligibility criteria for 90% home loans. You'll need to have a good credit score, stable income, and a solid savings history to get approved.

Risk of Negative Equity

• Potential for Financial Loss: If property prices fall, you could end up owing more than the property is worth. This is known as negative equity and can put you in a difficult financial situation.

Tips for Securing a 90% Home Loan

If you're considering a 90% home loan, here are some tips to improve your chances of getting approved:

Improve Your Credit Score

• Pay Bills on Time: Make sure to pay all your bills on time. Late payments can negatively impact your credit score.
• Reduce Debt: Reduce your credit card debt and other liabilities. High levels of debt can make it harder to get approved for a home loan.
• Check Your Credit Report: Check your credit report regularly for any errors or inaccuracies. Dispute any errors you find.

Save a Larger Deposit

• Demonstrate Financial Responsibility: While you only need a 10% deposit, saving a larger deposit can strengthen your application. It shows lenders that you're financially responsible and can manage your money effectively.

Provide Detailed Documentation

• Be Thorough and Accurate: Provide detailed and accurate documentation to support your application. This includes payslips, bank statements, tax returns, and other relevant documents.

Shop Around for the Best Deal

• Compare Offers from Multiple Lenders: Don't settle for the first loan offer you receive. Shop around and compare offers from multiple lenders to find the best interest rate, fees, and loan features.

Consider a Mortgage Broker

• Get Expert Advice and Support: A mortgage broker can help you navigate the complex world of home loans. They can provide expert advice and support, and they can help you find the right loan for your needs.

Conclusion

Securing a 90% home loan can be a great way to enter the property market sooner and achieve your dream of homeownership. While it comes with higher interest rates and the need for Lender's Mortgage Insurance, the benefits of faster homeownership and capital preservation can outweigh the drawbacks for many. Remember to carefully consider your financial situation, compare offers from multiple lenders, and seek professional advice to make an informed decision. By doing your homework and preparing thoroughly, you can increase your chances of getting approved for a 90% home loan and taking that exciting step towards owning your own home. Good luck, and happy house hunting!